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Sunday, June 29, 2014

There are three forms of intellect, as I see it. First, there is knowledge. Knowledge is raw data, the sort of thing they teach in school - the arithmetic tables and dates and names of famous people. "In 1492, Columbus sailed the ocean blue" - that sort of shit. Knowing a lot of stuff doesn't make you smart. Or it least it doesn't make you any smarter than an encyclopedia or a memory stick.

Wisdom, or reasoning, is something that can be derived from knowledge, when combined with experience. If you can apply reason to raw facts, then you can derive real truths about the world. Wisdom or reasoning is rarely taught in school these days. In fact, legislators are pushing for more "basic education" such as the "Three R's" (which means they cannot spell "Arithmetic" right off the bat).

Teaching knowledge-only education means emphasis on testing as a means of measuring education, and today's educators live in fear of the standardized test. We want our students to be little robots who barf up memorized answers, without thought, analysis, reasoning, or wisdom.

And this is sad, as facts alone cannot teach you anything. Reasoning and analysis can. In both Engineering and Law Schools, I was told that we were being taught not facts and statistics, but "how to think like an Engineer" or "How to think like a Lawyer". In other words, your reasoning skills were what was important, not your ability to memorize case citations.

Sadly, we live in an age of unreason - where logic and analysis is shunned in favor of something else.

What else?

Belief.

Belief is what is being sold today, and the reason why our legislators are so keen on standardized testing and knowledge-based learning. They do not want people to learn how to reason or how to analyze anything. Because if they did, they would see through the smoke-screen of our daily lives and the lies routinely fed to us by the media.

What they want us to do, instead, is believe. They want us to believe in God, or more specifically the God of certain prescribed religions (not those bad Gods of other religions). They want us to believe in slogans and sayings. They want us to give up reasoning and analysis in favor of sound bites and talking points.

What got me started on this was a recent post based on a piece of viewer mail. A reader could not believe that a friend of his who was an Engineer was trying to sell him into an MLM marketing scheme. How could reasonable people fall for such a scam?

Belief. She believed that she could make money without work, and create wealth without labor. So long as she was willing to believe, and not engage reasoning, she was destined to fail. And it is an easy belief to sell these days.

Belief is what sells payday loans, title pawn loans, rent-to-own furniture, and all sorts of bad bargains to the poor. So long as they do not reason and rely instead on belief they will fall for these sort of cons.

And again, this is why the powers-that-be want us to believe, but not reason.

Look around the world - all of it - and see where belief has gotten us. Every major religion has promoted wars and intolerance, all in the name of belief. Even Buddhists have gone on killing sprees in the name of religion. No one is spared. So long as people rely on belief instead of reason, we are doomed.

And it hardly ends with religion. Nationalism, Socialism, Communism - just about any "ism" relies upon Belief as its foundation - and not reason. Once you can sell someone on a "belief system" you can sell them just about anything - from Scientology to a used car. It makes no difference, of course. Money is usually the common denominator.

Reasoning seems to be a dying art these days. Few people seem willing to engage in it, as it is "hard" to do, and the answers it provides are often disappointing. When you reason, you realize there are no free ponies. When you believe, well, anything is possible (although not very likely).

So people engage in belief instead, as belief gives us all sorts of fun answers, even if they are the wrong ones. We believe that we will go to heaven, as that is comforting. Reasoning provides a less attractive answer.

We want to believe that if our party is elected to office, everything will be wonderful. Reasoning tells us that not much really changes for the better, no matter who is elected, and that the extreme views of either party, if allowed to predominate, are not the best solution.

Belief tells us that leasing a car is fun and cool. Reasoning tells us it is a bad bargain. Reasoning is no fun at all! In fact, he is a real kill-joy and a downer at parties.

But if you want to get ahead in this world, it is reasoning that is your friend, not belief. Belief will lie to you, again and again. And most people will continue to "believe" even when burned by belief their whole lives.

At the same time, they reject reason as unsound, even when he is proven right, again and again.

The choice is yours. Live in a fantasy world and be burned by harsh reality over and over again, or try reasoning, which might not sound like as much fun at first, but in the long run pays off big-time.

A friend of ours was hoping to inherit from her "wealthy" relatives and was surprised to find out, when the Will was read, that the wealthy relatives weren't all that wealthy. This is a common occurrence.

Why is this? Well, Mom and Dad or Auntie and Uncle have a lot of nice shit, to be sure. They have a nice home worth a half million dollars and a vacation home worth a quarter million. So the kids think that Mom and Dad (or Auntie and Uncle) are filthy with it, when in fact, they are quite middle class.

What's that you say? They have to be rich to afford a three-quarter-million-dollars in "paid for" real estate?

Wrong.

You see, they bought their house for $70,000 a long time ago. And the vacation home cost them $30,000. While that was a lot of money back then, it was, in terms of today's dollar, a lot less. They could not have afforded to buy the houses they now live in (or lived in), on their accumulated wealth or income.

That is the conundrum of getting old. Oftentimes oldsters find they cannot afford to buy the house they lived in. I know I can't, and I'm only 54 years old. The house we sold in Alexandria, Virginia, went for nearly $700,000. We paid $189,000 for it, which was the highest price paid in that neighborhood at the time. We could not have afforded to buy it at $700,000, no matter what, which is why we sold. And today, there are two homes on that lot, selling for over a million each. Let's just say that I could afford neither, much less both.

So heirs think their parents are "rich" as they have all this real estate that is paid for. But in terms of actual non-real estate assets, they might be quite poor, or at least middle class. And as our older generation is the recipient of something called a "pension" (ask your Grandpa what those were) they might, in fact, have very little in the way of cash assets.

So when the estate is settled, other than the home, there are not a lot of assets to be had. Yes, the house is worth a lot of money, but when you divide it by nine (children, nephews, grandchildren, etc.) it ends up being a lot less money than you'd think.

What got me started on this was a relative who was convinced that her Auntie was "rich" as she lived in an expensive home. After all, if you live in a half-million-dollar home you must have millions in the bank, right?

Wrong. She had some money, but when divided by nine, not a lot for each heir. And the relative who was counting on this inheritance is now pissing in their pants, as they thought than Auntie would fund their retirement. As it is, Auntie left them enough to buy a nice car.

So she goes berserk. Where did all the money go? Someone must have "took it" - right?

Wrong. There never was a lot of money. Middle-class people can end up owning homes that are worth far more than their net worth or their income would ordinarily support, over time. Inflation and rising home values means that some folks end up with a real estate asset that is huge compared to the rest of their assets.

And it means they live in a home that they could otherwise not afford.

If you think you are going to inherit "a lot of money" from Mom and Dad because they live in a fancy house, think again. Even though they have a nice house, their actual income and assets may be slim. Once a house is paid-for and you have Senior tax relief, the cost of living in it is minimal. Mom and Dad might be getting by on less money than you make - in fact, far less.,

Friday, June 27, 2014

Sorry not to have written more blog entries, but for the last two weeks we have been rehabilitating a condo, our last investment property, in preparation for renting it.

A reader writes:

"I have a very reasonable coworker that I hold in very
high regard. She's been nagging me for months about joining [an MLM scheme]. "It was
endorsed by [Pompous Reality Television Star]!" "If people weren't stupid, they'd save money
doing this AND have a passive income stream!" "I've always wanted to
own my own business, and now I'm going to be rich."

She knows me and my general cynicism regarding MLM, but she's
willing to put our friendship on the line. I log into this thing, and I
hear the same polished stuff I've heard about timeshare presentations,
vitamin marketing, etc. I have flashbacks to Amway. I smell a rat. I
hear shills in the audience.

I find lots of poorly written criticism for and against, but
no real analysis. Lots of anecdotes hinting around [MLM scheme] (sort of like
having a friend snap your picture as you walk by a celebrity or
politician), but no authoritative analysis.

Do you have any thoughts? Am I missing something? Could I
actually be too stupid to understand this? My brother didn't talk to me
for two years when I told him he was involved in a MLM scam. He
eventually saw the light. Could my respectable, practical, analytical,
engineer-friend just have a case of the vapors?"

Yes, even smart people do stupid things. In fact, they do them all the time.

I recounted how a friend of mine, who had not only an Electrical Engineering Degree, but a Law Degree as well, got duped into a "tax protester" scam, and ended up in trouble with both the IRS and the State Tax authorities. He should have known better, but he didn't.

And I recounted how a college chum of mine, who was an Engineering student, got caught up in a chain letter scam where you were supposed to mail gold Krugerrands to people on a list. He should have known better, but he didn't.

And then there is Chelsea Clinton's father-in-law, who was a former Congressman, got suckered into a number of Nigerian 419 scams - and then stole money from other people to fund the scams. He served five years in Federal prison. He should have known better, but he didn't.

Smart people do dumb things - all the time - and the common denominator is this: They think they can get something-for-nothing. Yea, they should know better, but they don't. They think that hard work and saving money is for chumps and that all the "smart people" take shortcuts to riches and wealth. So they sign up for these odious deals and then get ripped off, time and time again.

And yes, people with college degrees and even advanced degrees fall for this - which goes to show that a college degree is pretty worthless, if the accompanying wisdom doesn't come with it. If you doubt this, go to an "OWS" protest sometime. All those folks have college degrees, but are as dumb as toast.

Why is your friend pressuring you to join this MLM scheme? Simple. In order to get ahead in an MLM scheme, you have to sign up more and more "distributors" or some such nonsense, in a pyramidal fashion. So your "friend" is pressuring you to sign up, to make more money for themselves. In other words, your "friend" wants to make money off of you.

Find new friends. You can't make money in MLM schemes. And friends who try to con you into such schemes are not friends.

Tuesday, June 24, 2014

Do you agree with this statement and quote: “If you work
80 hours a week to make $100,000 per year, then you are POORER than someone who
works 40 hours per week and makes $60,000 per year”

Good Question!

Poverty or Wealth (the latter being the inverse of poverty) has nothing to do with INCOME but with how much money you OWN.

For
example, a young professional who makes $100,000 a year, but spends
$101,000 a year, and has little or no assets and a mountain of debt is
not "wealthy" but in fact is insolvent (bankrupt) even as he drives his
$50,000 SUV to work every day and eats out five nights a week.

Wealth is not annual INCOME but how much money you KEEP when it is all said and done.

In
the book "The Millionaire Next Door" the author points out that many
people who are millionaires actually have low incomes relative to their
overall wealth. They save money instead of spending it on symbols of
apparent wealth, and thus end up wealthy (owning money) over time.

The salary slave who works and works and works to make
more INCOME is often broke, as they spend massive amounts of money on
"convenience" items, which allow them to work the long hours. So they
hire a dog walker and a nanny and a lawn service and a cleaning service
and so on, and eat out in restaurants because they are "too tired to
cook" - and rack up credit card debt and end up broke.

I have a friend who is a pediatric nurse who lives this way.
She makes $110,000 a year in the ER and spends it as fast as she makes
it. She is over 50 years old and has less than $100,000 in the bank,
rents an apartment, and has nothing to show for 30 years of hard work. She thought she was "wealthy" but now facing retirement, is scared to death, as she realizes she has no savings whatsoever, and has to keep working well into her 60's or 70's (if they will let her) to maintain her lifestyle.

Owning yourself is the ultimate wealth. And if you "have to" do something to stay afloat on a daily basis, you are not wealthy at all - not matter how much you make - but rather are a slave with very, very nice bling-encrusted manacles.

So yes, I guess I would agree with that statement. It is
sometimes better to make less money and SPEND IT MORE WISELY which means
having the time to think about how you are going to spend your money
and invest it and become wealthy, as opposed to running faster and
faster on the hamster wheel going nowhere.

Learning to live on less, spend more wisely, and save and
invest more, is the path to real wealth. More income means only more
income - and a job is a MEANS to and END, not an end it and of itself.

Sadly, most people don't get it, and think that "making more money" is how you get wealthy.

I might add that having more time to yourself is really the
ultimate wealth - "owning yourself" and not having to work long hours.

Who
is wealthier? The guy who "has to go to work to pay the bills" or the
guy who can afford to spend time playing golf and going fishing?

Four in 10 millennials say they are "overwhelmed" by their debt --
nearly double the number of baby boomers who feel that way, according to
a Wells Fargo survey of more than 1,600 millennials between 22 and 33
years old, and 1,500 baby boomers between 49 and 59 years old.

Stop the presses! Middle-aged people have more money and savings and less debt than someone right out of college! This is amazing stuff! (Note the pathetically small survey size, too!)

Oh, wait. Maybe not. But it does reflect a weird mindset among a lot of young people - that once you graduate from college, you should instantly be successful and have the lifestyle of your parents.

Whoa, student loan debt is third on the list behind mortgage payments? I thought they were all "priced out of homes!" In other words, bullshit on all the previous stories about how student loans and bankrupting young people today. The media cites extreme cases and then paints them as the norm.

More than half of respondents said they are currently saving for
retirement. Of that group, 46% are saving between 1% and 5% of their
income. Another 31% are saving between 6% and 10%, while 18% are saving
more than 10%.

In other words, not only are the majority keeping their head above water, they have enough money to put aside for savings.

All of these statistics describe ME when I was that age. And you know what? Things turned out OK for me.

Yea, you'll have to live in some crummy apartment and drive a used car for a few years. And no, you can't have all the new Abercrombie shirts you want or the latest video games. You'll have to learn to budget and save and do without like anyone else your age has had to do for the last, well, millennia.

But it is not a bad time in life, and in fact, kind of fun. At least your body hasn't turned on you, yet.

Hang in there, kids. Stop feeling sorry for yourself and stop listening to the media who wants you to think you're a victim!

We are a mostly white nation and will be for some time. But what is white, exactly?

As I noted in an earlier posting, the nation's overall population is about 63% white, 17% Hispanic, 13%
African American and 5% Asian, according the Census Bureau. Yet there are some folks who already think that whites are a minority in this country. And alarmist articles posit that by 2043, white people will be a "minority"!

But of course, even if those statistics are true, by "minority" what we really mean is 49.999999% of the population - still the largest ethnic group in the country, and probably will remain the largest ethnic group in the country for decades, perhaps centuries. Unless all the other "ethnic groups" can band together to out-vote whitey, not much is going to change. (And divide-and-conquer will prevent that).

One problem in parsing these statistics, however, is, what exactly do we mean by white?

Quick Question: Is President Obama Black or White?

Most Americans (indeed most human beings on the planet) would be quick to answer, "Well, Black, of course!" and they would be wrong.

You see, Obama is half-white and half-black. And that is the first problem in doing racial statistics in America (or indeed anywhere). We tend to count people as "people of color" if they are of mixed-race makeup (which most "people of color" are). We count them as "white" only if they are 100% Wonder-bread white. And this goes back to the odious days of slavery, where we called people mulattos or octaroons based on how much "cream was in the coffee".

To racists in the South (or indeed, anywhere), so long as there was one drop of black blood in your genetic background, you were black, plain and simple.

This is, of course, all a bunch of silly racism. No, not the "one drop of black blood" nonsense, but rather the idea that you can "count" people as black or white, when in fact, there is a lot of racial interbreeding on this planet to the point that not many people can be counted in one column or another.

Nazi Germany had similar laws and rules about Jewishness, usually claiming someone as Jewish if at least on grandparent was Jewish (the Nazis, ironically, had a laxer test that the KKK).

So what's the point of this? The point is, white folks are not becoming a minority so much as what it means to be white, black, brown, or whatever, is changing. More and more people are in interracial marriages, and thus the children of these marriages are of mixed-race backgrounds. The racists at the Census bureau would count these children as black, hispanic, or whatever, but not "white", even if their make-up was 50/50.

So, it is not that we are being "overrun" by minority immigration or whatever, or that the "colored people" (people of color) are out-reproducing us, but rather the definition of whiteness, blackness, and brownness is skewed. We count interracial children as minorities, for some reason, but never as white. That in and of itself, is racist.

And yea, I said racists at the Census bureau, half in jest, as anyone who tries to calculate population based on race or color is, in effect, being racist themselves. To be a truly color-blind society, we will have to become truly color-blind, and stop making note of such things, which are really irrelevant, anyway. The Census bureau does not categorize us by eye color, hair color, or shoe size. Why by race?

And one reason these racial statistics are irrelevant is that racial identification statistics are based on self-reported data. If you check off the "Eskimo" box on the Census form, that's what they put you down for. It is hard to prove or disprove someone as being one race or another, and any attempts to do so are odious in nature. It would be a sick scene in a courtroom, if a judge were to attempt to establish a standard of blackness or whiteness or whatever. And who would the burden of proof be on? If I claimed to be black, would I have to prove it by showing black ancestors? And how could I prove or disprove my ancestors were black? Maybe the best way to address that issue is to just not go down that road, period.

And self-reporting is an interesting thing, as many Hispanics and Latinos report themselves to be "white" and consider themselves to be "white" and for all I know, are entitled to do so. In fact, many Hispanics and Latinos despise the terms "Hispanic" and "Latino" as they really are not descriptive of who they are, in terms of nationalism, racial makeup, or allegiance or loyalty.

As I reported before, many in Latin America take offense if you hint that they have any trace of Indian blood. A friend of mine from Costa Rica got indignant when I said he had a face like a Mayan statue. He said, "I am 100% of Spanish descent! I have no Indian blood in me!" and I realized I had stepped on a cultural landmine.

While in Mexico, I was reading a tour book that had an interview with a Mexican philosopher, and he said, that to understand the Mexican people, you have to understand that their ethnic background is that of the Spanish conquistador father who raped the native Indian mother. This creates, he said, an interesting psychological effect, in that Mexicans have identities in both cultures, but if pressed, will all claim to be of pure Spanish descent.

My Cuban friend is the same way, and he would bristle at any suggestion whatsoever that any part of his family had any shades of off-white in it. Racism is alive and well, in Latin America (and the Caribbean). He would not count himself as "Latino" or "Hispanic" but as "White" or "Spanish." And of course, even though smack-dab in the middle of the Caribbean, Cubans would not likely view themselves as Caribbeans. Labels are misleading.

So, what is the solution to all of this? Stop counting.

The racial demographics system is flawed from the get-go, if we allow one race to be counted only if they are "pure" (100% white) and then lump everyone of mixed race into "colored" categories. It is not only flawed, it is racist. And you can't even try to fix it, so just stop trying and stop counting.

If you've studied Brownian motion in school, or understand the laws of probability, you would quickly figure out that in a county made up of a number of races, it is certain, over time, that eventually these races will mix and everyone end up one neutral shade of grey - or a rainbow of different shades, depending on how skin color is inherited. And over time, that is what will likely happen in the USA. And this is nothing to be alarmed about, but indeed, progress.

And when that happens, people will look back and say, "Gee, wasn't that odious how people back in 2014 used to label people based on their skin color? Even government forms had a box to check off for 'Race'!!! How primitive and backward-thinking!"

What someone's skin color is, should really be as insignificant as their eye or hair color. This entire concept of "race" and "whiteness" really needs to be examined - or best yet, just tossed in the trash.

Because it is based on a flawed premise: that in order to be white, you have to be 100% white, but to be any other race, you need only be partially of that race.

Wednesday, June 11, 2014

I received a second notice from Lifeline Screenings, via the Georgia Farm Bureau, which handles my homeowners coverage (they are very cheap and include wind coverage - even hurricanes - in the basic policy!).

I figured since they were from the Georgia Farm Bureau, they must be pretty good, as there is an implied endorsement there.

But then I thought again. An unsolicited piece of junk mail. Is this a good deal? Likely not. And they do want $135 for these "tests:. A quick search reveals some interesting comments about their services:

The upshot is that they use ultrasound - you know, the blobby mess you use to look at pictures of your baby in the womb. As one of the above articles noted:

"No, I’m sorry but those are not reasons to get screened. That’s like
saying that lots of people die from cancer and Life Line takes pretty
photographs so I should let them take my photograph. If screening
reduced morbidity and mortality, that might be a reason to get screened,
but they are not claiming that. They can’t claim it, because there is
no evidence to support doing these tests in the general population."

My "art" at the Patent Office included ultrasound devices, including some medical devices. So I have to agree with these articles. It is not clear to me that ultrasound imaging systems can take pictures with enough resolution to show a potential stroke-causing clot in your arteries, etc. It is possible, I suppose that they may be able to find some potential problems - but it would be a very long-shot kind of deal. If you have no symptoms of illness, why get the test?

In other words, the way this is usually done, is that you have symptoms of an illness, then you go to a doctor who then orders the proper testing. This system provides imaging of dubious use, to patients who are healthy.

Two
other physicians, Drs. Erik Wallace and John Schumann, both associate
professors of internal medicine at the University of Oklahoma’s School
of Community Medicine, were even more blunt in an op-ed piece that appeared in the Tulsa World in January:

Consumers
should have the freedom to spend their money as they see fit. But
direct-to-consumer screening tests that offer little to no value wrapped
in marketing claims of great medical benefit without disclosure of the
potential risks are at best disingenuous and at worst unethical.

In other words, if you want to go, spend a few hours blowing $135, then be our guest. But in terms of value-for-the-dollar in terms of medical diagnosis, it is a crapshoot.

How do they make money at this? Well, the screenings are held in church basements or rec centers. Some speculate that well-meaning groups offer this space for free, or at a steep discount, so their overhead is very low. The testing is brief, and according to one former employee on ripoffreports, the events are packed (due to the mass-mailings) so they do a lot of tests and clear a lot of cash. The same employee noted:

"The GREATER problem is Life Line Screening has become more of a money
making machine over the years than the screening service they hope you
view them as. Employees are strongly encouraged to "upsell" tests and
packages (yes selling, like a car salesman trys to "add" floormats or a
DVD player to your radio)"

So, if you go, it might cost more than the $125, or $139, or whatever number they put in the junk-mailer sent to you.

Are they doing anything illegal or unethical? The latter depends on your opinion on ethics. From a legal standpoint, unless they are misrepresenting the value of these tests (in other words, do they really detect the diseases they claim they will?) then they might be breaking the law. But this does not appear to be the case, at least so far.

They are doing the same old, same old, and that is selling an unnecessary service at a price that is no bargain. And in America, that is not illegal. It is akin to invention brokers charging you $20,000 to "Patent your invention and market it to industry" and then doing a crappy job. They are not breaking the law, just overcharging for services you may or may not need.

I guess, to me, the real deal is this: It arrived in an unsolicited piece of junk-mail. That says it all, right there.....

An interesting article from an old copy of "Model T Times" illustrates what I am talking about when it comes to "dreamers."

I was reading the May-June 1971 issue of Model-T Times that someone had given me, and I found an interesting article ("So You Want to Buy An Antique Car!" by T.R. Thomas) which has some sage advice about (a) buying hobby cars, (b) prices paid for such cars, (c) how basically, you will get 50% of what you invest in such a car, back, and (d) how "dreamers" ruin all the fun by wasting your time with clapped out junk that they think is priceless.

I have touched on all these issues before, but Mr. Thomas managed to nail them all in one article!

On pricing:

"Nearly all of us have heard stories about prices received for various makes
and body types. Some of the allegedly big prices paid for nondescript pieces in my opinion are "fish stories". Naturally, every so often we hear of a
fantastic price paid for a car that far exceeds the car's current value.
Undoubtedly some of these stories are true, particularly in the classic car
area, but many are exagger­ated. The purchaser may have
sentimental memories of a particular car from his child­hood days and wants that car, price being no object. But these unusual
transactions are rare."

On Diamond Mines:

"Prices of antique cars vary all over the landscape. I have found that the uninitiated generally have inflated ideas as to the value of the car they wish to sell after the death of "Uncle Charlie". I recently took a look at a '37 Buick that allegedly was in excellent condition and had 20,000 miles on the odometer. The car had not been on the road for approximately five years but had been run once a month until a year before I saw the car. The time I chose to examine the car coincided with the owner's death, leaving his son responsible for the car's disposal.

When I called the young man on the phone, I was the
recipient of the ever popular "cat and mouse" routine. By the end of the conversa­tion, I wasn't sure whether he had a car or a diamond mine for sale!I finally made an appointment.to inspect the car. When I ar­rived, the son ushered me into a small frame garage at the rear of the house. In the dimly lit garage, I saw the "diamond mine"! True the odometer reflected 20,000 miles and the upholstery was new. The car being a 1937 Buick, four door sedan with side mounts, had not been washed in at least 10 years. The paint, a gunmetal gray, had years of dirt ac­cumulation on all horizontal surfaces. All the brightwork was severely pitted and rusted due to the cinder floor of the garage. Due to a dead battery, the car would not run and the tires were completely dry rotted. A hydraulic brake line had also rotted away, so that too, would need replacing before the car could be moved.

The price? This man refused to state it categorically, but said he had turned down $1,200! I assume he wanted approximately $2,000. A real buy ? Heck no!! I felt the car's fair value was around $750. As far as I know the son still has his "diamond mine" and will probably have it for some time if he sticks to his ridiculous price. This is unfortunately not an isolated case. I have found time after time that there are better buys from an enthusiast than from an individual who has no experience with antique or classic cars and has a car for sale."

In other words, the guy is a time-waster. Rather than look up the book value for the vehicle by checking out pricing guides, comparable sales, and the like, he just puts a price on it at whim, or better yet, no price at all, thinking he can "put one over" on people who actually collect cars and know their value. As a result, the car sits for years more (and is likely why it sat for so long).

He gets lots of inquiries and calls, from people who (mistakenly) think they will get a good deal from him. He equates this interest with value. After all, if everyone is asking him if he is going to sell the car, it must be worth a lot of money! But such is not the case, and oftentimes, such folks hang onto a car for years - decades even - as it slowly rots, until either inflation catches up with "their price" or their surviving spouse unloads the rusting piece of junk at a fire-sale price.

The article was written in 1971, so it seems this sort of behavior has been around since the dawn of time. The best way to deal with time-wasters like this, is just to walk away. When someone says, "Call for Price!" there are no bargains to be had. When you call and they still can't tell you a firm price (other than they "turned down" an already realistic offer, or want you to "make an offer") then it is time to move on.

Tuesday, June 10, 2014

Is this three-wheeled car the "next big thing" in transportation? Or just an elaborate hoax? The media really doesn't care to find out either way. They just want to sell you a story that you will watch or click on, so they make money.

The three-wheeled car is nothing new. In the jolly olde UK, they have had them for years, as tax rates on cars were structured such that "cycle cars" became quite popular, the most notorious of these being the Morgan 3-wheeler.

The idea is appealing, as with three wheels, a "car" could be registered as a motorcycle, thus avoiding a lot of airbag and bumper requirements, and thus eliminating a lot of costly certification trials (which can cost tens of millions of dollars, just for one car). It would also make registration and insurance cost less as well. And with a tiny engine and small body, gas mileage should be pretty phenomenal.

In the last few years, a fellow named Elio has been selling the idea of a three-wheeled car, which he says will sell for under $10,000 and get 84 miles per gallon. He has an option to use the old Hummer plant in Louisiana to build these cars, which are now slated to come out in late 2015.

A lot of people think Mr. Elio is full of hooey. Many point out that the average price of a new motorcycle is in the neighborhood of $12,000, and that is without air conditioning and power windows. Building a "cycle car" in America, on a limited production basis, and reaching the sub-$10,000 number would be difficult, to say the least.

Second, with econobox cars selling for not a lot more (and seating four and having more than one door and more than three wheels) whether the demand for these cars will be strong is anyone's guess. In many States, you would have to get a motorcycle license to drive one, and perhaps wear a helmet. These issues would suggest that demand for a three-wheeler would be pretty low.

And 84 miles per gallon? That might be a bit of a stretch, as that is moped-like gas mileage, not motorcycle mileage.

Some folks have "crunched the numbers" on the Elio motors concept, and have raised a number of red flags. See:

This next one in particular, analyzes the financials of the company and its proposed marketing plans, and notices some scary assumptions are being made by the company - for example that the Elio will become the fourth-largest selling vehicle in America:

"250,000 is a big number, in other words, and – if Elio hits that number –
that would make the Elio trike the number 4 best-selling vehicle in the
US using 2011 numbers.
The Elio would out-sell the Honda Civic, Toyota Corolla, Ram pickup,
etc., etc. And it would have to do it all with (get this) 120 dealers."

To me, there are a number of red flags here. The Elio motors concept reminds me a lot of the Tucker (which, despite a big Hollywood movie, was also an ill-fated and ill-conceived venture) or the perpetual "Air-powered car" deal that floats to the top of the cesspool every few years. Both are favorites of the media, as they capture eyeballs and generate click-through revenue.

The parallels to Tucker are pretty interesting. Both had oddball, "revolutionary" designs, and both had prototypes that were based on old car parts (the Elio, apparently scavenged from an old Geo Metro). Both took deposits on cars that were not yet built and years away from being built. Both were horrifically underfunded and used unorthodox means of funding. Both had acquired rights to use a huge left-over assembly plant.

Whether Tucker was a con-man is up for you to decide. His business partner had been earlier convicted of stock fraud. I would like to think that Tucker was just naive about how business works and didn't realize how much money is needed to run a car company, particularly when building one up from scratch. I don't think he understood, too, how hard it would be to compete with companies that already had assembly lines in production and years of experience in the business, as well as vertically integrated production facilities and established dealer networks.

But dreamer or con-man, the Tucker story ends the same way. And no, it was not a "conspiracy" to put him out of business. Even if he had succeeded, he would have failed, as the Tucker would have easily cost double what the big-3 would have charged to build a similar-sized car.

So maybe Mr. Elio is just as naive. Maybe. Maybe not. Like myself, he attended General Motors Institute, so having been in the "belly of the beast" he should know one or two things about what a pain in the ass it is to build a car. The profits can be marginal, the competition is murder, and it is a global business. We'll get back to that last part later on, as it is the principal argument that others have not addressed.

The compressed-air-car is another favorite of CNN and other news sources. On a slow news day, they do a story about "the car that runs on air!" as the plebes love a "something-for-nothing" story and believe they can just give a few turns of a bicycle pump and then be off to work in their air car.

The reality is that the efficiency of using compressed air as a means of storing energy is miserable. You'd be better off driving an 18-wheeler to work, it is that bad. The major problem though, is energy density - the ability to store large amounts of energy for a given size and weight. Electric cars have suffered from this problem since the beginning, with heavy lead-acid batteries providing low energy density and high weight. Lithium-Ion batteries solved that problem for the electric car business (perhaps).

Compressed air would be lucky to have the energy density of a lead-acid battery. Something comparable to Lithium-Ion? Not even in the cards. Know-nothings will spout, "Well, you never know! Technology advances all the time!" But there is a flaw in that argument. Technology cannot advance past the wall of sheer Physics. Compressed air simply isn't going to fix its efficiency and energy density issues, simply because of the laws of Physics. And the laws of Physics cannot be repealed by the legislature.

Not surprisingly, the "air powered car" turns out to be a mixture of a dreamer and a con-man. The dreamer was the designer, who was French (they are dreamers, the French) who got hooked up with a guy who started taking deposits for "modular factories" that would build these air-powered cars "next year". Needless to say, the factories and the air-powered cars never materialized.

With the air-powered car, the stories always said that production was going to begin "early next year" (often failing to mention a year) so that even an old story sounded promising. But "next year" after "next year" came and went, for over a decade, to no avail.

The promoters, on the other hand, kept issuing press releases, with nice graphics, demonstrations, and videos - and new prototypes. And hungry newsroom managers lapped it all up, needing something to fill up their time slots and knowing that these sort of stories sold well with the plebes.

And that is the first red flag to me, about Elio motors. It is press-release news, and if you Google online, you can see that there are waves of Elio stories, each corresponding to a press release, demonstration, or new video by the company. The company seems to spend more money on press releases than in actual R&D or building of the factory or manufacture of any cars. And in each press release, we are told that the fabled car is "coming out next year" - for several years now.

Is the Elio a hoax or just another product of a starry-eyed dreamer? Does it make a difference? You can lose money, either way.

I don't think the Elio is going to make it, and here's why. I had the same idea, years ago, and quickly dismissed it. I had seen the Bombardier three-wheeled motorcycles on the road, and thought, "Gee, why not put in two seats, a closed body, and sell it as a cycle-car? It would get good gas mileage and cost little and sell well!" But then I thought about it and realized there were a lot of flaws in my thinking:

1. The $5-a-gallon gas crises of 2008 was over, and people really aren't interested in hyper-miler cars.

3. Making such a car in America would be prohibitively expensive, as it would be a niche market vehicle, and as such, economies of scale would not be present.

4. No matter how bad-ass a roll cage you put into the thing, it would be a deathtrap compared to even a basic car. Litigation would result, and you'd likely be sued out of existence.

5. The government could step in at any time and decide to classify any three-wheeled vehicle with an enclosed cabin as a "car" and thus pull the rug out from under you at any time. The savings in not having to certify it as a "car" would evaporate overnight.

6. So many others have failed at this before, such as the Corbin Sparrow. The Corbin is still in business, but they sell them for a staggering $30,000 a copy, which tells you what Elio needs to be thinking about, in terms of real production costs. The Carver three-wheeler suffered from the same cost problem.

7. The gas mileage would not be all that great, compared to some micro-cars already on the market, or to hybrids. Small size and a small engine would deliver good gas mileage, but not astounding mileage.

8. If this was such a great idea, why haven't people in other countries where gas prices are far higher considered it? Yes, they have tuk-tuks in Thailand and India. But even in those countries, four-wheeler micro-cars are replacing these.

The last item is the real stickler. If this sort of vehicle doesn't make economic sense in places where gas is like $10 a gallon, why would it sell in America, the land of cheap gas? (and yes, compared to the rest of the world, we are the land of cheap gas). Why don't they have these in Europe? Even in the UK, probably the largest market for three-wheeled "cars" (not tuk-tuks) in years gone by, has largely gotten out of the market. At double the gas price we have here, they don't think it makes economic sense.

And one wonders why this idea has not taken hold in Japan, either - a place with high gas prices and great experience in motorcycles. Sounds like a product Suzuki would jump right on. (Answer: They did, but stopped making them in the 1960's. See link list at end of article).

If Mr. Elio did become successful selling this design, how long would it take for foreign concerns to jump on the same bandwagon and offer far cheaper models made overseas? Production costs in places like Mexico, India, China, and Korea, would be far less than the cost of US labor in Louisiana. And existing motorcycle companies (who already have three-wheeled designs on the market) could easily add such vehicles to their lineups, taking advantages of their existing economies of scale (for example, in engine production) to produce a vehicle for less cost than Mr. Elio could ever hope for.

But like I said, it is an interesting idea. I wish him well, but I know how this is going to end. Already we've seen the pattern of prototype after prototype being produced, production schedules being pushed back again and again, and repeated rounds of fund-raising. This could go on for years - even decades, like the air-powered-car guy.

When it comes right down to it, most people would rather spend $10,000 on a used Focus, with four doors, four wheels, and four seats. Yea, the gas mileage isn't as good, but so long as gas stays under $4 a gallon, that really isn't much of an issue.

But the main point of this, is what I call Press-Release News. I've seen two new Elio pieces in the news recently, and both are basically barf-ups of press releases. They are not critical pieces where someone explores the pros and cons of the concept, the background behind the story and the funding, but rather just puff pieces that cheer-lead for the company. This is not real news or analysis. It is just a filler article.

Sadly, NBC posits theirs as "The Art of the Startup." The video has only Mr. Elio speaking, with no one asking any hard questions. This is news?

Can you imagine NBC interviewing Richard Nixon over Watergate this way? Just give old "Tricky Dick" five minutes of airtime to tell his side of the story and then just leave it at that. Let the viewer decide!

A CNN piece posits that Elio is already making these cars, when in fact not a single production model has been made to date.
Yet another local news piece features a giggling female reporter driving one in
circles in a parking lot at low-speeds. The prototype doesn't even
have seatbelts (Hint to Mr. Elio: You can buy retractable seatbelt kits
from J.C. Whitney! Why is it so hard to get them into your prototype?)

And sadly, the news media does this over and over again. They do a "compressed air car" piece, saying it will be available "next year" and never bother to wonder why they did the same piece two years prior which also claimed that the product would be coming out "next year". There is a distinct lack of curiosity in news-people today. They want ratings, and that means controversy or eye-candy. But real investigative journalism? Nah, it bores the plebes.

What is up with this? It is laziness, plain and simple. If you issue a press release with some interesting story, nice graphics, and perhaps some compelling video, well it will get played on the air, almost verbatim. No one will vet it or provide an opposing viewpoint. In print, it is even worse. I've seen "news stories" that appear word-for-word identical in several papers or online sources, which in turn are exact copies of the press-release on the company's website.

This ain't journalism. And it illustrates why you have to unplug from the media and think for yourself.

* * *

List of Three-Wheeled Motorcar Companies (the dream has been around a long time!) in no particular order:

What do all of these cars have in common? They were the response to harsh economic conditions, high fuel prices, high registration costs, and low incomes. Once economic conditions improved in their home countries, demand for such vehicles tapered off. Most are no longer made. Auto-rickshaws are still around in India and a few other countries, but even there, are being supplanted by more modern four-wheeled conveyances, as their local economies improve and people prosper.

And that is the problem for the three-wheeled car. It is a poverty-car, and people will buy one when times are tough and money is tight. But as our economy continues to recover, demand for such cars will be very low. A lightly used econobox is a more rational choice for such a buyer.

And that right there is the problem for Mr. Elio. The idea made sense in 2008 when the price of gas shot up to $5 a gallon. It makes less sense, today.